FSA told to start compensation process for mis-sold customers

The Financial Services Authority has been told it must start the compensation
process for small businesses potentially mis-sold interest rate swaps after
complaints the regulator has not done enough to get the process underway.

In a letter to the FSA seen by The Sunday Telegraph and written by Conservative MP, Guto Bebb, the regulator is told of concerns the scheme is being delayed. “It would appear that delays are being created by the efforts of the FSA to ensure a collective and comparable process across the 11 banks which have agreed to work on a resolution to this mis-selling of inappropriate products to SMEs,” wrote Mr Bebb, who has led the parliamentary campaign to get redress for swap mis-selling.

In June, the FSA announced it had agreed a scheme with Britain’s four biggest banks, including Barclays, Lloyds Banking Group, HSBC and the Royal Bank of Scotland, to compensate firms mis-sold interest rate hedging products.

The FSA’s review followed an investigation by The Telegraph.

Several other smaller lenders have joined the scheme, including the Co-Operative Bank, Santander UK, and Yorkshire and Clydesdale banks.

Barclays is understood to be ready to launch the review process and is putting together a team of more than 500 staff, including nearly 200 external contractors, to work on the redress scheme for its customers.

Recruit firms hiring staff to work on the swap mis-selling compensation schemes have been advertising jobs paying a daily rate of as much as £900.

However, Mr Bebb warned there were fears some lenders were being “intransigent” than others, delaying the ability of other banks to launch the process.

“We should not allow a position to develop where the banks can only move forward at a pace dictated by the most intransigent and in-effective institutions,” wrote Mr Bebb.

Banks have already made provisions against the expected compensation costs. Barclays has set aside £450m, while HSBC has set aside £130m and RBS £50m. Lloyds said at its half-year financial results that it did not expect the cost to be “material”.